By Tanaya Macheel and Jacqueline Corba
Bitcoin may have come a long way since its creation, but it still has a lot left to do before it can realize its ambition to be the "email of money" ー fast, cheap, and most importantly, borderless.
"A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution,” Satoshi Nakamoto, Bitcoin’s famously pseudonymous creator and author of the whitepaper considered to be the digital asset's Bible, wrote nearly a decade ago on Oct. 31, 2008.
Bitcoin’s popularity ー and consumers' awareness of it ー has soared. But it hasn't yet replaced cash or credit cards, nor is it used to buy everyday items like coffee or clothes.
Instead, many are using it as a store of value, and buying and holding Bitcoin is a good way to test the asset for those just trying to understand the system or protect themselves against volatile price fluctuations.
Increasingly, serious and accredited investors are also seeing that opportunity, and it’s driving companies and institutions to build the products and services to serve them.
This doesn’t mean Bitcoin has veered off-course, according to Jimmy Song, a Bitcoin developer.
"What Satoshi intended is for it to be decentralized money, and that’s what we have — a decentralized store of value that people utilize to store their wealth in a way the government can't take it away," Song said in a special "10-Year Bitcoin Anniversary" episode of Cheddar's Crypto Craze. "You own your own money, you’re self-sovereign over your own money."
Stephen Pair, CEO of Bitcoin payment processing company BitPay, one of the oldest companies in the industry, said that many people do use cryptocurrency to pay for day-to-day purchases.
But he acknowledged that an increasing portion of his company's business comes from "higher-value transactions” like cross-border payments, B2B settlement transactions, and supply chain transactions.
"We're solving real problems for real businesses on a daily basis,” Pair said.
BitPay, now seven years old, processes over $1 billion in payments on a yearly basis.
Earlier this year, the payments unicorn Stripe ー which was one of the earliest adopters of Bitcoin payments, adding the capability in 2014 ー ditched its support of the cryptocurrency, citing low volume in Bitcoin transactions relative to the costs associated with having to process them, not to mention, the price volatility. Stripe justified its decision by saying that the price of Bitcoin would routinely shift by the time time it processed transactions.
That wasn’t too long after Circle, another early Bitcoin exchange and wallet start-up, began de-emphasizing its Bitcoin services, sending customers to Coinbase so it could instead focus on global mobile payments.
In order to mitigate the uncertainty of Bitcoin, many have turned to so-called "stablecoins," digital currencies which maintain a 1-to-1 ratio with a fiat currency, typically the American dollar.
Charlie Shrem, founding member of the Bitcoin Foundation, said stablecoins “are the new fad.”
“You’re relying on the legal system to maintain crypto tokens; it inserts an unreliable middleman,” Shrem told Cheddar. “Tether, Circle USD, Paxos — all these other stablecoins are essentially glorified versions of PayPal ($PYPL). There’s no point to them because you’re still relying on that centralized company to give you your money [so you can] redeem it."
The stablecoin "fad" began with Circle’s USD coin and Cameron and Tyler Winklevoss’ Gemini dollar ー which has been in the works for far longer and received regulatory approval by the New York State Department of Financial Services last month. Paxos Standard, another OG and historically compliant Bitcoin company, got approval from the NYDFS the same day. Gemini and Paxos are the only two regulated stablecoins.
Shrem noted that in the past month Bitcoin has been less volatile than the S&P 500, the Nasdaq, and the Dow, calling the asset “the new stablecoin.” He also praised the Winklevoss brothers for their efforts in maintaining good relationships and transparency with regulators.
"Unlike with other industries, with crypto, it’s better to ask for permission rather than forgiveness. You don’t want to be like me and have to ask for forgiveness when you’re about to be sentenced.”
(Shrem was famously sentenced in 2015 to two years in prison after pleading guilty to aiding and abetting the operation of an unlicensed money transmitting business.)
Chad Cascarilla, CEO of Paxos, said that being a regulated trust company makes Paxos “basically a bank,” the very institutions Bitcoin was created to circumvent. Paxos, in fact, was born out of the realization that blockchain could solve broader problems than the ones for which Bitcoin was intended.
Cascarilla expanded his company in 2015, rebranding what had been known as ItBit into Paxos and separating the cryptocurrency business from the blockchain projects.
"Bitcoin tries to solve one particular type of problem: how can you create a store of value on a blockchain that’s open to anyone in the public and can be instantaneously movable," Cascarilla said. "Bitcoin’s doing a good job of solving it. It hasn’t fully solved it yet."
For full interview click here.